1. Key Concepts Flashcards
Define the term ‘scarcity’.
Scarcity refers to the limited availability of economic resources relative to society’s unlimited demands for goods and services.
Define the term ‘choice’.
Since resources are scarce, not all needs and wants can be satisfied. This necessitates choice between competing alternatives, and the idea of opportunity cost.
Define the term ‘efficiency’.
Allocative efficiency refers to making the best possible use of scarce resources to produce the combinations of goods and services that are optimum for society, minimising resource waste.
Define the term ‘equity’.
Equity is concerned with the concept of fairness. Inequity is often used to reference inequality in the income distribution, wealth and economic opportunities. Equity is distinct from equality, which would describe a situation in which economic outcomes are similar for different people.
Define the term ‘sustainability’.
The ability of the present generation to meet its needs without compromising the ability of future generations to meet its own needs. It refers to limiting the degree to which the economic activities of the current generation cause harmful environmental outcomes such as resource depletion.
Define the term ‘intervention’.
Refers to government involvement in the workings of markets when the efficient market mechanism fails to achieve certain societal goals such as equity, economic well being or sustainability.
Define the term ‘interdependence’.
Consumers, firms, households, workers and governments interact with each other within and across nations in order to achieve economic goals. The greater the level of interaction, the greater the degree of interdependence.
Define the term ‘economic well being’.
Concerned with the level of prosperity and the quality of living standards enjoyed by members of an economy. It includes present and future financial security, the ability to meet basic needs, the ability to make economic choices permitting achievement of personal satisfaction and the ability to maintain adequate income levels over the long term. There are broad disparities in economic well being both within and across nations.
Define the term ‘change’.
The economic world is in a continual state of flux. Empirically, the world is always subject to continuous change at institutional, structural, technological, economic and social levels.
